A quixotic approach to compensation?
Quixote Corporation (QUIX) seems like an odd name for a company, since Don Quixote would hardly have been much of a businessman. But names don’t really matter. As Cerberus Capital Management has proven, you can inadvertently name yourself for the 3-headed dog who guards the entrance to the underworld and still make truckloads of money.
Quixote’s proxy statement (filed Wednesday) caught my eye — not just because of the name, but because the Compensation Discussion and Analysis (CD&A) doesn’t read like most others. It’s written in Plain English, a feat that’s technically required for CD&As but (as SEC Chairman Cox has peevishly noted) is rarely achieved.
Maybe it’s just that I’m not used to a CD&A I can actually understand, but Quixote seems unusually forthright about its subjective approach to executive compensation. The compensation committee, we’re told, “does not utilize objective guidelines or formulae, performance targets or short-term changes in our stock price.” So what the heck does it do? Well, like any sensible comp committee, it looks at the performance of each officer and the company, checks out what competitors pay and works with a consultant, but in the final count it “relies upon its collective judgment as applied to the challenges confronting the Company.”
The CD&A also notes that ‘”he recommendations of our CEO play a significant role in the compensation-setting process.” Not exactly a shocker to some of us, but I give these guys credit for coming right out and saying it. They’re shyer about perks, though; you have to peer at the footnotes to the Summary Comp Table to see that all three named officers got a company car, grossed up for taxes, plus more tax gross-ups ($70K in the case of Chairman/CEO/President Leslie Jezuit) for restricted stock awards that went into a retirement plan.
Maybe you like Quixote’s compensation philosophy, maybe you don’t. But at least you can read about it without getting a migraine.
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October 5th, 2007 at 12:22 pm
Interesting. Reflects a realism: executive evaluation cannot be reduced to clean metrics. Though I would fault them for not sharing findings of the Lake Woebegone study (”let’s all be 75th percentile”). Cox wants disclosure but laments length, his only premise that retail investors will study a better CD&A, that’s disputable.
Re the CEO helping to set his lieutenants pay, agreed, that is commonplace. In fact, it’s necessary. The board evaluates/selects the CEO, but the CEO basically needs to tell the board about his lieutenants’ performance.
October 5th, 2007 at 3:56 pm
Wendy/Michelle:
Frustrated shareholders of Quixote have witnessed the bull market from the sidelines, for the stock price has treaded water for four years, as the maker of energy-absorbing highway crash cushions continues to report pretax losses (last reported profit was for fiscal year ended June 30, 2003).
“In a village in La Mancha (whose name I do not care to recall) there lived, not very long ago, one of those gentlemen who keep a lance in the lance-rack, an ancient shield, a skinny old horse, and a fast greyhound.”~ Spanish novelist Miguel de Cervantes Saavedra, Don Quixote (1605)
Senior management is not as chivalrous as Don Quixote de la Mancha, and it is doubtful that they would take up the order of knight-errantry: “ to defend maidens, to protect widows, and to rescue orphans and distressed persons.”
http://10qdetective.blogspot.com/2007/10/pay-for-performance-tilting-at.html
My Best-
David J Phillips, Publisher
http://www.10qdetective.blogspot.com